Sally’s Mother Support.

Tax File Memorandum

Subject：Sally’s mother support.

Issue

1. Sally’s mother is a dependent

Section 152 (e)(1)(A) For federal tax purposes, qualifying child or qualifying relative for whom taxpayer may claim exemption deduction (per dependent: $3,950 for 2014; $4,000 for 2015). Qualifying relative cannot be qualifying child, and must satisfy relationship, gross income, and support tests.

The following four requirements must all be met for an individual to be considered a qualifying relative ( Code Sec. 152(d)). 31

First, the individual is the mother of Sally which bear the relationship to the taxpayer. Second, The individual’s gross income for the calendar year ( ¶143) in which the taxpayer's tax year begins must be less than the exemption amount for the year ( ¶133) ($3,950 for 2014; $4,000 for 2015). Sally’s mother’ gross income is $2000 which meets the requirement. Last but not least is that over half of the individual’s total support for that calendar year must have been furnished by the taxpayer ( ¶147) ( Code Sec. 152(d)(1)(C)), which means Sally need to pay over half of her mother’s support.

1. Support from Sally

According to Regulation Sec. 1.152-1(a)(2), support refers to cash, food, clothing, shelter, medical needs, and all other items and services necessary for a person's maintenance. It also pointed out that in computing the amount which is contributed for the support of an individual, there must be included any amount which is contributed by such individual for his own support, including income which is ordinarily excludable from gross income, such as benefits received under the Social Security Act.

1. The Medicare payment of Sally’s mother.

In Rev. Rul. 70-341, 1970-2 C.B. 31, Treatment of "medicare" benefits received by or on behalf of an individual, pursuant to title XVIII of the Social Security Act, with reference to his gross income, his status as a dependent, and his retirement income credit. Title XVIII of the Social Security Act, as amended, provides medicare benefits of two kinds: part A of that title provides a program officially called “Hospital Insurance Benefits for the Aged,” which is referred to herein as “basic medicare;” and part B of that title provides a program officially called “Supplementary Medical Insurance Benefits for the Aged,” which is referred to herein as “supplementary medicare.”

Basic medicare provides basic protection against the cost of hospital and related care for all individuals who are 65 years of age or older who receive monthly social security or railroad retirement payments, and for other eligible individuals who are 65 years of age or older and who apply for basic medicare protection. In this case, Sally’s mother are entitled to the basic Medicare. Basic medicare benefits are generally paid directly to the hospital, extended care facility, or home health agency that provides services to the covered individual; and the covered individual is then notified of the amount of the basic medicare benefit paid on his behalf. Accordingly, basic medicare benefits received by (or on behalf of) an individual under part A of title XVIII of the Social Security Act are not includible in the gross income of the individual for whom they are paid. Rev. Rul. 70-341 holds, in part, that basic medicare benefits paid under Part A of title XVIII of the Social Security Act, 42 U.S.C. sections 1395c-1395i-2 (Supp II 1972), are received by (or on behalf of) an individual and are includible as the individual's own contribution to the individual's support in determining who provided more than one-half of such individual's total support. That’s to say Basic Medicare payments on a person’s behalf must be treated as contributions by such person toward his own support.